Compensation as Part of a Comprehensive Solution to the Palestinian Refugee Problem

Ottawa, 14-15 July 1999


Workshop Report



The question of Palestinian refugees has remained unresolved for more than fifty years. It has been a major element of the Arab-Israeli conflict throughout that period, and represents one of the most difficult issues to be addressed in permanent status talks between Israel and the Palestinians.

The IDRC/PRRN workshop on refugee compensation, as the formal conference title suggests, examines only one element of what must be a much larger package of elements comprising a comprehensive solution to the refugee issue. The workshop was convened in the view that compensation is important, and that discussions of the topic can be sustained among technical experts without in any way compromising the other inherent rights of the refugees. This was the general view expressed by participants at the 1997 IDRC/PRRN "stocktaking" conference on Palestinian refugee research, which noted that: "Academic discussion of compensation... in no way constrained negotiators. On the contrary, it served a useful function by identifying the advantages and disadvantages of different compensation systems, thus providing information that was likely to be of value to all sides in negotiations."

Despite differences on many issues, all of the Palestinian, Israeli and international participants in the compensation workshop brought with them to the table a sincere desire to promote a just and lasting resolution of the refugee issue, as well as a constructive and professional approach to the subject. They also upheld the principles agreed at the earlier 1997 conference: that " researchers should not be constrained by 'red lines' and taboos, but rather should use their freedom as scholars to think originally and creatively--to 'enlarge the menu' rather than self-censor. Equally, however, a certain amount of political realism is also critical if academic musings are to have policy impact."

This summary has been prepared by Palestinian Refugee ResearchNet in an effort to fairly represent the content and tenor of discussions among participants. It is not a collective statement, however, nor has it been approved by individual participants. Consequently, any errors or omissions are wholly the responsibility of PRRN.


The Case for Compensation

The first workshop session examined the case for refugee compensation from the perspective of international law. The purposes were three-fold: to identify what international law had to say with regard to refugee compensation; second, to determine what models or principles might inform a compensation regime; and third, to identify how the compensation issue might be affected by domestic and other legal processes.

On the first issue, there was general agreement that states bear responsibility for their actions (the doctrine of "state responsibility"), and that refugees (both Palestinians and Jews) have a right to restitution or compensation. This right has especially been given voice in the Palestinian case in article 11 of United Nations General Assembly Resolution 194 (III) of December 1948, which asserted that:

...compensation should be paid for the property of those choosing not to return and for loss or damage to property which, under the principles of international law or in equity, should be made good by the Governments or authorities responsible.

With regard to the legal principles governing compensation, it was recognized that many of these might not be applicable to the Palestinian case. International law has largely presumed claims made by one state on behalf of its nationals against another state. It is much less developed with regard to possible claims by stateless persons, or persons who were not nationals at the time of loss (although this is beginning to change as a consequence of development in Yugoslavia and elsewhere).

One legal principle that may have important bearing on compensation concerns the concept of fault. There was broad agreement that, in international law, the payment of compensation recognizes that property seizure took place ("objective responsibility"), but does not require or represent an admission of moral blame. This principle might help to make compensation more politically palatable within Israel: it is possible to accept that compensation ought to be paid because property was seized and refugees barred from returning, irregardless of how blame is apportioned for the events of 1947-48.

Compensation amounts are theoretically linked to the adjusted value of properties seized, although in practice lump-sum settlements (which have become a common mechanism for dealing with inter-state claims) often result in claimants recovering only a portion of their losses. Claims might also be made for pain, suffering, and other non-material losses. While this is traditionally better established in national than international law, there are nonetheless many precedents. International law is also unclear with regard to the practical and economic limits that be placed on compensation amounts.

Participants also discussed how legal processes might affect a refugee agreement. It was agreed that a collective agreement between Israel and Palestine on refugee compensation would not extinguish individual refugee rights. This, while Israel and a future Palestinian state would likely pass any domestic legislation necessary to implement a refugee agreement, dissatisfied refugees who are citizens of third countries might theoretically press specific claims against Israel or Israelis in their own national courts. However, both because of jurisdictional issues and because national courts would likely interpret any such claims in light of the broader peace agreement, most participants agreed that this would not pose a major challenge to a refugee agreement.

Further discussion of these issues is provided in the workshop papers by Arzt, Barakat, Benvenisti, Lee, and Quigley.


Calculating Palestinian Claims

There are various elements which could be factored into the calculation of Palestinian property claims. These include:

  • private and public goods
    • land and other immovable property
    • moveable property
  • lost earnings and opportunities
  • psychological and social damages
  • depletion or use of natural resources (such as water)

Various estimates for these amounts have been put forward.

In 1951, the UN Palestine Conciliation Commission estimated property losses at 120 million Palestinian Pounds (LP). Israel accepted the principle of compensation at this time, under certain conditions (including war reparations from ASrab states). In 1966, economist Yusif Sayigh estimated total losses at LP757 million. Atif Kubursi, in data presented to the workshop, estimated material losses at LP743 million, rising to LP1,182 million if human capital losses were included.

UN PCC (1951)

Sayigh (1966)

Kubursi (1996)

value in 1947 Palestinian Pounds

LP 120 million

LP 756.7 million

LP 743 million (property)

LP 1,182.2 million (property and human capital)

value in 1947 USD$

$484 million

$3, 050 million

$2,994 million

$4,763 million

value in 1998 USD$ (adjusted for inflation)

$3,373 million

$21,259 million

$20,868 million

$33,198 million

value in 1998 USD$ (adjusted for inflation and 4% real rate of return)

$23,958 million

$150,975 million

$148,203 million

$235,769 million

(currency and inflation adjustments by PRRN, utilizing exchange rate of LP 1 = USD$4.03, and changes in the US Consumer Price Index for 1947-98)

These amounts would be further increased if psychological damages were included.

Other previous figures include those by Rashid Khalidi, who suggested $20,000 per refugee or $40 billion total; Shlomo Gazit, who suggested that $7-10 billion in compensation was feasible; and Salman Abu Sitta , who has placed the total value of compensation much higher, at around $526 billion. A paper by Joseph Alpher and Khalil Shikaki mentions an amount of $15-20 billion in the context of a "traditional Palestinian solution" to the issue, but does not suggest a figure in connection with the two compromise proposals that they explore.

The various estimates that have been put forward for Palestinian claims were discussed by participants. Some emphasized that compensation was not a substitute for either return or property restitution, and that the return of larger numbers of refugees to their original homes reduced the level of resources that might be needed for compensation. Conversely, less return increased the case for more compensation. Others suggested that the compensation amounts would likely be much smaller, determined by negotiation and the political willingness of Israel to pay, rather than by calculations of specific losses.

There was considerable discussion too of documenting claims. Some participants felt that the documentary evidence was adequate to support specific claims by former property owner, noting that 2.5 million land records existed, as well as map and photographic evidence. Others were more doubtful of this, suggesting that the records are incomplete, and that much land was not accurately registered. Still others suggested that sorting through claims by three-quarters of a million 1948 refugees for over two million property holdings would be slow, complicated, and very expensive, likely to consume a decade or more. Additional complexities would be generated by non-documented moveable property, by local traditions of property ownership (notably the practice of musha' or usufructory rights to communal village lands), and by the death of original property-owners (and an ever-expanding number of descendants and potential claimants).

Palestinians, of course, may not be the only compensation claimants. Neighbouring countries--especially Jordan, Syria and Lebanon--have faced significant financial costs as a consequence of hosting Palestinian refugees for more than five decades. Moreover, the resolution of the refugee issue would bring with it the termination of UNRWA, thus requiring host countries assume the cost of providing health and education services to any remaining former refugees. Consequently, these countries might expect some level of assistance for past and future costs.

One final issue that was raised regarded the certainty of the final bill. It was noted that Israel would be unlikely to agree to an open-ended compensation process that left it in doubt as to the ultimate scope of its liabilities. Consequently, many participants felt that a total ceiling or envelope for compensation would likely probably emerge from Palestinian-Israeli negotiations, akin to the lump-sum payments used in many cases of state-to-state compensation.

Further discussion of these issues is provided in the papers by Abu Sitta, BADIL, Benvenisti, and Peretz, as well Kubursi's 1996 paper on Calculating Palestinian losses in 1948, published by the Center for Policy Analysis on Palestine.


Finding the Resources

The workshop discussion on potential Palestinian claims highlighted the importance of finding the resources for any agreed compensation regime. To a large extent, the level of resources that might be available for this purpose is unknowable in advance. Nevertheless, the resource constraints are real, and there may be important connections between how a compensation system is designed and whether adequate funding can be raised.

The international donor community has thus far pledged around $7 billion over ten years in support of the peace process through aid to the West Bank and Gaza, and has actually delivered approximately $500 million per year. This, it was suggested, might be seen as a rough indication of how much peace is "worth" to the international community. While some participants hoped that substantially expanded funds could be secured from international donors to finance the refugee component of a final status agreement, most of those with experience in the foreign aid sector warned that this was unlikely to be the case: Arab donors (already generous in their support for the Palestinian territories) suffer from stagnant economies, while Western donors have faced shrinking aid budgets and new demands for their attention (such as Kosova). Moreover, while donor support might be forthcoming for the repatriation and developmental aspects of the refugee agreement, it was especially unlikely that donors would explicitly fund a cash compensation scheme.

If this is indeed the case that external donor resources are limited, then it is inevitable that the bulk of any contribution for refugee compensation would have to come from Israel. This could take several forms.

Restitution: A number of participants emphasized that Israel could and should restitute substantial amounts of refugee property to its original owners. Others, however, thought that this was very unlikely. Israeli participants strongly emphasized the broad Israeli public consensus against the return of significant numbers of refugees.

Capital Stock: Israeli capital stock in the West Bank and Gaza (settlements, roads) might be seen as another sources of compensation. However, some noted that many settlements might be annexed to Israel in a final status agreement. Others noted that Israeli had generally extracted more in taxes from the territories than it had invested during the occupation, and that the settlements themselves were illegal and hardly the currency of compensation. None felt that this was a major source of compensation resources.

Compensation payments: While the Israel is economically capable of generating substantial amounts of financial resources for compensation-- especially if these are spread out over time-the political sustainability of compensation is more problematic. Several sorts of obstacles need to be overcome:

  • Public perceptions that the refugee issue is not a priority, that Israel bears no responsibility, and that other donors stand ready to assume the costs. It is important to underscore to the Israeli public that the post-1948 seizure of Palestinian property obligates compensation, that compensation need not be construed as an admission of moral responsibility, and that international donors, while willing to provide significant support for the peace process, are unlikely to assume substantial responsibility for compensation. The political viability of compensation might also be enhanced by establishing it in the context of support for regional development (rather than compensation per se), and by paying a portion of compensation in the form of Israeli goods and services (thus creating direct economic benefits for Israeli exporters).
  • Some participants hoped that a regional "peace dividend" would result in greater resources due to a reduction in military expenditures. Others doubted, however, that defence spending would decline in the immediate aftermath of a peace agreement.
  • Palestinian compensation claims may be met with countervailing claims by Jewish refugees from Arab states. There was a consensus among workshop participants that it would be inappropriate to link these two issues, since the Palestinians bore no responsibility for acts conducted by Arab states. Requiring Arab compensation as a corequisite for Palestinian compensation would be to provide some Arab states with a veto over the peace process; proposing that the claims "cancel each other out" would be to inflict injustice on two sets of claimants. It was further noted that, rather than being seen as rivals, Palestinian and Jewish refugees are actually united by common support for the rights of those who have suffered property seizures and forced displacement. Consequently, there may be grounds for cooperation rather than competition.
  • It was also suggested that the "conclusiveness" of a refugee agreement would have important effects on Israeli willingness to support a compensation system. If Israelis are assured that the final status agreement will resolve the refugee issue, and if there is both a defined amount due and a defined end to the process, they are more likely to support it. On the other hand, any fear of a continuing and open-ended process of refugee claims would make Israel much less willing to accept or contribute.

There was also considerable discussion of the role of UNRWA, and its dissolution in the wake of a refugee agreement. Fears were expressed that a rapid dissolution of the agency would result in a redirection of donor resources away from (former) refugees, and place a significant burden on those governments assuming responsibility for providing social services to this population. On the other hand, the termination of UNRWA will be an important indicator of the resolution of the refugee issue, and something that Israel (and donors) will expect to occur in this context. Consequently, many participants felt that, in the context of final status arrangements, a temporary post-UNRWA UN refugee organization should be established on the foundations of UNRWA so as to facilitate the transition and minimize the leakage of erstwhile UNRWA funding.

Throughout the session, a number of participants emphasized the substantial gap that exists between many estimates of the amount needed for refugee compensation, and the amounts that would be available under present circumstances. This creates an urgent need for greater attention to the issue of resource mobilization.

Further discussion of these issues is provided in the workshop papers by BADIL and Brynen.



Participants devoted considerable attention to the possible mechanics of a compensation scheme. That discussion focused on four key questions:

  • to whom should compensation be paid? (claimants)
  • on what basis should compensation be paid? (formula)
  • how should compensation be paid? (mechanism)
  • who should administer/adjudicate the claims process? (process)

In each of these areas, participants identified the strengths and weaknesses of different approaches.



claims made by individual 1948 property owners (and their heirs)

strengths: provides most direct linkage between compensation and losses, and hence greatest degree of psychological closure.

weaknesses: requires documentary evidence, which may be problematic; claimant pool is elderly and diminishing; if original owner were deceased, multiple relatives might lodge competing claims; the pattern of 1948 property ownership and current inheritance laws would disadvantage women.

claims made by extended family (hamula) or villages

strengths: villages and clans were the primary units of social organization in Palestine at the time; might mitigate the problems caused by collective ownership of many agricultural lands.

weaknesses: difficulty in establishing the membership of claimant groups; social divisions arising from disputes over distribution; possible gender inequities.

claims made by all refugees, irregardless of property ownership, including original and subsequent generations

strengths: avoids shortcomings noted above; recognizes that all refugees (including second- and third-generation) have suffered disadvantages; greater gender equity.

weaknesses: large claimant pool reduces the amounts of individual payments; need to determine "who is a refugee".

collective claim made by Palestinian state on behalf of all refugees


strengths: simple; helps to offset the future costs of services provided by Palestinian state

weaknesses: unsatisfying to refugees; no guarantee that refugees would benefit

collective claims made by host governments for the previous costs of hosting refugees

strengths: simple; helps to offset the past and future costs of services provided by host states; might linked to adequate rights for any Palestinians choosing to remain in host countries

weaknesses: unsatisfying to refugees; no guarantee that refugees or Palestinians would benefit

Several participants stressed that UNRWA registration is not an indicator of refugee status, since registration was based on service and geographic criteria (that is, persons having lost their livelihoods, in need of assistance, and located within the UNRWA area of operations). Consequently, the actual number of refugees might well be higher than current UNRWA figures. It was also noted that UNRWA expertise, data and archives will prove invaluable in any likely set of compensation arrangements.



claims-based system, in which compensation is based on the value of lost property (or a portion thereof)

strengths: provides most direct linkage between compensation and losses, and hence greatest degree of psychological closure.

weaknesses: requires substantial documentary evidence, which may be difficult; extremely expensive and time-consuming to administer; original claimant pool is elderly and diminishing, and might die before process completed; if original owner were deceased, multiple relatives might lodge competing claims; recreates the social inequalities of 1948 Palestine, with a large proportion of compensation going to large land-holding families, and less to poorer refugees; possible disputes or appeals by claimants of the valuations assigned; if only limited resources are available, the gap between the valuation of claims and the amounts actually paid may generate substantial dissatisfaction.

modified claims-based system, in which claimants are slotted into various "categories" (based on estimated claim size), and receive standardized payments


strengths: requires less documentary evidence, administration and adjudication than the purely claims-based system above; payment system could be made more progressive to mitigate social inequalities.

weaknesses: like the pure claims-based system, this system retains the complexities that arise from claims made by family members on behalf of deceased property owners; possible disputes or appeals by claimants of the category to which they have been assigned.

per capita payment system, in which all refugees receive equal payments

strengths: by far the fastest, cheapest and simplest system to administer; offsets gender and social inequalities of pre-1948 property ownership.

weaknesses: large claimant pool reduces the amounts of individual payments; need to determine "who is a refugee"; provides less linkage between losses and payments, perhaps diminishing the psychological value of compensation.

modified per capita payment system, in which some classes of claimants (i.e. returnees vs non-returnees, or first-generation vs subsequent generation refugees) receive different levels of compensation

strengths: still much faster, cheaper and easier to administer than claims-based systems, although more complex than straight per-capita system; scarce resources can be concentrated on particular groups of claimants (for example, first-generation refugees); offsets gender and social inequalities of pre-1948 property ownership.

weaknesses: large claimant pool reduces the amounts of individual payments; need to determine the refugee "category" of each claimant; provides less linkage between losses and payments, perhaps diminishing the psychological value of compensation; possible social tensions between different classes of claimants.



cash payments to individuals

strengths: easiest to administer; provides refugees with greatest flexibility

weaknesses: requires cash financing of compensation scheme; cannot be directed towards specific developmental or social objectives; risk of high consumption and socio-economic dislocation caused by sudden cash infusion (minimized by gradual payment, however)

services/vouchers/entitlements for individuals and families


strengths: allows non-cash resources to be harnessed for compensation; facilitates Israeli and international contributions; can be better integrated into developmental objectives.

weaknesses: less flexibility for refugees; risk of social tensions between those entitled to special services and others; less direct connection to actual 1948 losses

investment in community development

strengths: promotes effective use of resources to promote general development of ex-refugee community; facilitates resource-generation from Israel and international donors

weaknesses: diffusion of benefits may make it difficult for refugees to see this as "compensation"; possibility of little refugee control over development decision-making

equity (refugee cownership of investment or development corporation or similar collective entity)

strengths: combines some of the strengths of the cash and community development models

weaknesses: combines some of the weaknesses of the cash and community development models



payment of lump sum to Palestinian state, to be subsequently distributed

strengths: allows Palestinian state (and hence the elected representatives of Palestinians) to determine modalities of payment, rather than leaving these to diplomatic negotiation

weaknesses: potential problems of transparency,accountability, and leakage; no guarantee that refugees would benefit

binational commission (Palestine, Israel)


strengths: reflects negotiating process and requires no additional actors

weaknesses: potential politicization of technical issues and administrative deadlock

trilateral commission (Palestine, Israel, other)

strengths: less chance of deadlock, compared to binational commission

weaknesses: risk that difference among members slow process

international commission (others, acceptable to Palestine and Israel)

strengths: less chance of deadlock, compared to trilateral commission; might also deal with Jewish refugee claims

weaknesses: members of commission not accountable to primary stakeholders (Palestinian refugees, Israeli taxpayers)

UN commission

strengths: less chance of deadlock, compared to trilateral commission; might also deal with Jewish refugee claims; high degree of international legitimacy; high degrees of transparency.

weaknesses: members of commission not accountable to primary stakeholders (Palestinian refugees, Israeli taxpayers); fears of UN bureaucratization or politicization

UNRWA or UNRWA successor agency

strengths: less chance of deadlock, compared to trilateral commission; high degree of international legitimacy; knows refugee issue well; well-established track-record; high degrees of transparency

weaknesses: members of commission not accountable to primary stakeholders (Palestinian refugees, Israeli taxpayers); fears of UNRWA bureaucratization or politicization

determination of amounts, modalities and mechanisms left to future Palestinian-Israeli negotiations

strengths: delays discussion of a controversial issue to a future, and perhaps more amenable, time; might facilitate moving forward on other issues

weaknesses: no guarantee of eventual agreement; potential stalling, as original 1948 refugee population continues to age

There was also discussion of the compensation models used in other (refugee and non-refugee) cases. The tribunal mechanism used in the case of Iranian-US claims proved ineffective at dealing with smaller claims, which were ultimately dealt with by a lump-sum payment. Many lump-sum agreements, it was noted, fell short of satisfying the expectations of many claimants. The claims-based system used by the Commission for Real Property Claims in Bosnia has been very slow, despite the comparative recentness of the conflict. It has also been underfunded by the international community. By contrast, the per-capita component of the UN Compensation Commission for claims against Iraq had proven quick and cost-effective in dealing with certain types of refugee and damage claims. In this case, however, UN control over Iraqi oil sales has meant that substantial resources are available for compensation. Holocaust reparations/compensation, Cypriot property claims, Uganadan refugees, aboriginal land settlements, and a number of other examples were also raised. A fuller discussion of these was presented in a series of case studies and bibliographic materials prepared for the workshop. However, it was also generally agreed that there was no "standard model" that could be easily applied to the Palestinian case.

Three possible models for the Palestinian case were briefly presented by various participants in the conference. One proposed the establishment of a Palestinian national fund or land commission, large-scale property restitution, and utilized a claims-based system for other elements of compensation. A second, based on the model of Canadian compensation for Japanese-Canadians interned during WWII, proposed flat per capita payments to all refugees, and collective compensation paid to refugee institutions (in this case, possibly including the Palestinian state). This might be administered by UNRWA or a temporary successor-agency. The third model proposed the use of a modified per capita system, with larger payments to original refugees, smaller payments to subsequent generation refugees, and small repatriation payments to assist those choosing to return to Palestine. This model also assumed some payments to the PA and host governments for the costs of refugee services, and the establishment of a transitional UNRWA-successor agency.

Further discussion of these issues is provided in the workshop papers by Arzt, Barakat, Benvenisti, al-Husseini, and Lee, and the annotated case summary/bibliography by Zerriffi.


Political Constraints

All participants recognized the magnitudes of political constraints confronting any resolution of the refugee issue. There remains a large gap between the views of refugees--who emphasize their right to return and restitution--and an equally strong Israeli public consensus against both large-scale return and property restitution. Israelis will need to face up to the need (and the value in) financing compensation; Palestinian claimants may be disappointed by the level of resources available. The question of Jewish refugee claims against Arab states was also raised. Ultimately, not all Palestinian refugees will necessarily be satisfied with any eventual refugee agreement, and any Israeli government may also face a "hard sell" of its own to a skeptical public.

Conference participants frankly discussed all of these issues. Many noted the importance of such a frank discussion, and of promoting greater discussion of these issues within Palestinian and Israeli societies. Recent "people-to-people" activities in this area may represent a particularly important initiative.



By way of summary, it was noted that a compensation system is needed to facilitate the generation of the necessary resources; be manageable, simple and effective; offered a high degree of conclusiveness; and enjoy strong political support. The workshop discussions had highlighted that it was possible to move towards these objectives in a constructive and productive manner.

It was also emphasized, once again, that compensation was only one element in resolving the refugee issue, and that the refugee issue was only one of the subjects to be addressed in Palestinian-Israeli talks on permanent status arrangements. Nevertheless, there was value in "fractionating" aspects of the problem in order to study them in greater detail.

Participants identified a number of areas for future work:

  • further comparative study of other cases of refugee compensation, and specific examination of the potential role of the United Nations
  • public opinion polling (or deliberative focus groups) on Israeli attitudes to the refugee issue, and on how greater flexibility might be encouraged
  • continued dialogue among experts
  • people-to-people activities

Finally, particular gratitude was expressed to CIDA for its overall support of the workshop, and to the staff of IDRC for their outstanding efforts in hosting the event.

Workshop Papers

The following short papers were delivered at the workshop:

Maureen O'Neil, Opening Comments

Salman Abu-Sitta, Restitution and Compensation.

Donna Arzt, The Right to Compensation: Basic Principles under International Law

BADIL, The Impact of Return on Compensation for Palestinian Refugees

Daoud Barakat , Compensation Position Paper

Eyal Benvenisti, Principles and Procedures for Compensating Refugees: International Legal Perspectives

Rex Brynen, Financing Palestinian Refugee Compensation

Jalal al-Husseini, Observations on Compensation in the Palestinian Refugees' Case

Luke Lee, The Issue of Compensation for Palestinian Refugees

Don Peretz, Palestinian Refugee Compensation

John Quigley, Compensation for Palestinian Refugees: Initial Comments

Maren Zerriffi/PRRN, Refugee Compensation: Selected Cases and Source Materials